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The American Journal of Managed Care December 2018
Feasibility of Expanded Emergency Department Screening for Behavioral Health Problems
Mamata Kene, MD, MPH; Christopher Miller Rosales, MS; Sabrina Wood, MS; Adina S. Rauchwerger, MPH; David R. Vinson, MD; and Stacy A. Sterling, DrPH, MSW
From the Editorial Board: Jonas de Souza, MD, MBA
Jonas de Souza, MD, MBA
Risk Adjusting Medicare Advantage Star Ratings for Socioeconomic Status
Margaret E. O’Kane, MHA, President, National Committee for Quality Assurance
Reducing Disparities Requires Multiple Strategies
Melony E. Sorbero, PhD, MS, MPH; Susan M. Paddock, PhD; and Cheryl L. Damberg, PhD
Cost Variation and Savings Opportunities in the Oncology Care Model
James Baumgardner, PhD; Ahva Shahabi, PhD; Christopher Zacker, RPh, PhD; and Darius Lakdawalla, PhD
Patient Attribution: Why the Method Matters
Rozalina G. McCoy, MD, MS; Kari S. Bunkers, MD; Priya Ramar, MPH; Sarah K. Meier, PhD; Lorelle L. Benetti, BA; Robert E. Nesse, MD; and James M. Naessens, ScD, MPH
Patient Experience During a Large Primary Care Practice Transformation Initiative
Kaylyn E. Swankoski, MA; Deborah N. Peikes, PhD, MPA; Nikkilyn Morrison, MPPA; John J. Holland, BS; Nancy Duda, PhD; Nancy A. Clusen, MS; Timothy J. Day, MSPH; and Randall S. Brown, PhD
Relationships Between Provider-Led Health Plans and Quality, Utilization, and Satisfaction
Natasha Parekh, MD, MS; Inmaculada Hernandez, PharmD, PhD; Thomas R. Radomski, MD, MS; and William H. Shrank, MD, MSHS
Primary Care Burnout and Populist Discontent
James O. Breen, MD
Adalimumab Persistence for Inflammatory Bowel Disease in Veteran and Insured Cohorts
Shail M. Govani, MD, MSc; Rachel Lipson, MSc; Mohamed Noureldin, MBBS, MSc; Wyndy Wiitala, PhD; Peter D.R. Higgins, MD, PhD, MSc; Sameer D. Saini, MD, MSc; Jacqueline A. Pugh, MD; Dawn I. Velligan, PhD; Ryan W. Stidham, MD, MSc; and Akbar K. Waljee, MD, MSc
The Value of Novel Immuno-Oncology Treatments
John A. Romley, PhD; Andrew Delgado, PharmD; Jinjoo Shim, MS; and Katharine Batt, MD
Medicare Advantage Control of Postacute Costs: Perspectives From Stakeholders
Emily A. Gadbois, PhD; Denise A. Tyler, PhD; Renee R. Shield, PhD; John P. McHugh, PhD; Ulrika Winblad, PhD; Amal Trivedi, MD; and Vincent Mor, PhD
Provider-Owned Insurers in the Individual Market
David H. Howard, PhD; Brad Herring, PhD; John Graves, PhD; and Erin Trish, PhD
Currently Reading
Mixed Messages to Consumers From Medicare: Hospital Compare Grades Versus Value-Based Payment Penalty
Jennifer Meddings, MD, MSc; Shawna N. Smith, PhD; Timothy P. Hofer, MD, MSc; Mary A.M. Rogers, PhD, MS; Laura Petersen, MHSA; and Laurence F. McMahon Jr, MD, MPH

Mixed Messages to Consumers From Medicare: Hospital Compare Grades Versus Value-Based Payment Penalty

Jennifer Meddings, MD, MSc; Shawna N. Smith, PhD; Timothy P. Hofer, MD, MSc; Mary A.M. Rogers, PhD, MS; Laura Petersen, MHSA; and Laurence F. McMahon Jr, MD, MPH
Many hospitals penalized for readmissions were given readmission grades of “no different” or “better” than the national rate on the Hospital Compare website.

Objectives: To (1) compare the 2015 hospital grades reported on Medicare’s Hospital Compare website for heart failure (HF) and acute myocardial infarction (AMI) readmissions with the HF- and AMI-specific scores for excess readmissions used to assess Medicare readmission penalties and (2) assess how often hospitals were penalized for excess readmissions in only 1 or 2 conditions, given that hospitals received a penalty impacting all Medicare payments based on an overall readmission score calculated from 5 conditions (HF, AMI, pneumonia, chronic obstructive pulmonary disease, and total hip/knee arthroplasty).

Study Design: Retrospective secondary data analysis.

Methods: Descriptive analyses of hospital-specific, condition-specific grades and excess readmission scores and hospital-level penalties downloaded from Hospital Compare.

Results: Of the 2956 hospitals that had publicly reported HF grades on Hospital Compare, 91.9% (2717) were graded as “no different” than the national rate for HF readmissions, which included 48.6% that were scored as having excessive HF admissions, and 87% received an overall readmission penalty. Of 120 (4.1%) hospitals graded as “better” than the national rate for HF, none were scored as having excessive HF readmissions and 50% were penalized. AMI data yielded similar results. Among 2591 hospitals penalized for overall readmissions, 26.6% had only 1 condition with excess readmissions and 27.5% had 2 conditions.

Conclusions: Many hospitals with an HF and AMI readmission grade of “no different” than the national rate on Hospital Compare received penalties for excessive readmissions under the Hospital Readmissions Reduction Program. The value signal to consumers and hospitals communicated by grades and penalties is therefore weakened because the methods applied to the same hospital data produce conflicting messages of “average grades” yet “bad enough for penalty.”

Am J Manag Care. 2018;24(12):e399-e403
Takeaway Points

Hospital grades for readmissions seen by consumers on Hospital Compare are often out of line with the readmission penalties assessed to hospitals. Although the same readmission data are used to calculate penalties and grades, hospital grade assignment conservatively takes into account measurement uncertainty, leading to most hospitals receiving an average grade of “no different than the national rate.” The threshold for a readmissions financial penalty does not account for uncertainty, however, and is additive across many conditions, leading to the majority of hospitals (even with good grades) receiving a financial penalty for readmissions.
Risk-adjusted rates of unplanned hospital readmissions are used for 2 purposes: (1) assigning “grades” to hospitals on the patient-facing CMS Hospital Compare website and (2) assigning financial penalties to hospitals by the Hospital Readmissions Reduction Program (HRRP).1,2 In 2015, the conditions targeted by the HRRP included heart failure (HF), acute myocardial infarction (AMI), pneumonia, chronic obstructive pulmonary disease (COPD), and total hip/knee arthroplasty; coronary artery bypass graft was added in 2017. The cost of readmissions for HF, AMI, pneumonia, and COPD for Medicare patients totaled $5.2 billion in 2013—one-third of the estimated $15 billion for Medicare readmissions annually.3

On Hospital Compare, CMS reports the grades assigned by computing a risk-adjusted 95% CI estimate for the hospital’s readmission rate and comparing the interval estimate with the national 30-day observed unplanned readmission rate. The readmission rates are risk adjusted for characteristics available in claims data that make an unplanned readmission to the hospital more likely, including age and comorbidities known at the time of the original admission. Hospitals with a 95% CI estimate including the national rate for the condition are graded as “no different than the national rate”; if their 95% CI estimate is entirely below the national rate, they are graded as “better than the national rate”; and if the entire 95% CI is above, “worse than the national rate.”1 If fewer than 25 cases are available, the grade is listed as “not available” because there are too few cases to allow calculation. The use of 95% CIs for grade assignment on Hospital Compare was not specified by legislature; the rationale for the grading methodology as displayed on Hospital Compare is not reported, but it is a conservative approach that ensures a high degree of certainty that hospitals are correctly categorized on Hospital Compare as performing better or worse than the national average.

The HRRP was established in response to Section 3025 of the Affordable Care Act (ACA), which requires CMS to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012.2 The ACA specified the initial conditions chosen, the maximum percentage penalty by year of program rollout, public reporting of readmission performance on Hospital Compare, and that the penalty was applied to the hospital’s entire Medicare IPPS payments; it also gave the secretary of HHS discretion to expand to more conditions. Financial penalties under HRRP2 are assessed using the same exact readmission data used for the condition-specific grades on Hospital Compare; however, the penalty assessment for HRRP only uses the risk-adjusted readmission rate, rather than the 95% CI, for each condition. As detailed in the fiscal year 2002 IPPS final rule, although the penalty percentages are small (0%-3%), they apply to all Medicare revenues at the hospital, not just readmissions, so financial impact varies by the Medicare volume at an individual hospital. For the HRRP, the excess readmission ratio (ERR)2,4 is calculated for each condition targeted by the policy (ie, 5 conditions in 2015) using a risk-adjusted “predicted” number of readmissions in the numerator and the expected readmission number at an average hospital with similar patients (ie, patients with similar risk factors for readmission, such as age and comorbidities) in the denominator. An “average” hospital is identified by its mathematical average performance. With “excess” defined as any value greater than 1.0, an overall ERR greater than 1.0 across all included conditions will prompt a penalty, but the dollar amount of each specific hospital’s penalty is determined by both the number of excess readmissions for all conditions included in the HRRP and the hospital’s excess cost for the readmissions.

Despite the same risk-adjusted readmission rates being used for assigning grades and financial penalties, the algorithms for assigning grades and penalties differ. By incorporating measurement uncertainty, Hospital Compare’s publicly reported grades categorize most hospitals’ readmission rates as “no different” than the national rate and far fewer as “better” or “worse” than the national rate.1,5 In contrast, readmission financial penalties are calculated without respect to measurement uncertainty. Because of this difference, we hypothesized that many hospitals receive financial readmission penalties despite having Hospital Compare grades of “no different” or “better” than the national rate. In this analysis, we examined condition-specific ERRs and overall penalties assigned to hospitals graded as “no different” or “better” than the national rate for HF and AMI readmissions on Hospital Compare. We also assessed how often hospitals were penalized for excess readmissions in only 1 or 2 targeted conditions.

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